Should I Switch to a Credit Union?

While covering Occupy Boston in 2011, I was intrigued by a movement-within-the-movement focused on moving your money: Bank Transfer Day. Channeling Occupy’s spirit of resistance, it was established by activists and community organizers as a national day of action to encourage people to close their accounts at big banks and switch to local credit unions.

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Credit unions are community-focused, federally insured, nonprofit, and member-owned banks. They exist to provide financial services for specific groups, like the employees of a union or people who work or live in a certain neighborhood. Like banks, credit unions offer financial services: debit cards, checking accounts, savings accounts, loans, and mobile banking options. But unlike banks, credit unions do not have outside investors and are not motivated by profit.

All credit unions are considered cooperatives, because all the account holders are members — or shareholders — and decisions are made democratically, says Rebecca Pear, the director of member services at Brooklyn Cooperative Federal Credit Union. Membership often allows individuals to vote on the credit union's board of directors, she says.

All the profits that credit unions make go back into the business in the form of dividend payments to members, higher interest rates on savings, and lower interest rates on loans, says Michael Mattone, assistant vice president of public relations and corporate communications at Municipal Credit Union.

Ever since that time covering Occupy, the thought of switching to a credit union has been spinning in the back of my mind. The whole process has always seemed burdensome, but after doing some research, I learned that it’s much easier than I thought.

Why Leave Your Bank? Credit unions are ideal for anyone who wants to know the people who operate their bank and easily ask questions about their finances and accounts. “We do very well serving people who are just in the very basic stages of understanding their finances,” Pear says. “That’s young people, a lot of young freelancers, and also low-income individuals who may have only ever gone to check-cashing stores. We have a lot of products that help people build their credit history, help repair their credit history.”

Since the money credit unions make goes back to members in the form of loans, it’s going to be reinvested into the community — in contrast to a big bank, which sends its profits to its shareholders, not customers. “It’s kind of like buying at a local clothing store instead of buying at a national chain,” Mattone says.

Finally, the current economic status quo is marked by massive inequality that fails most of the world’s population. It’s been a major issue during this election year, and much of Bernie Sanders’ popular campaign platform rests on the idea that the way mainstream banking is set up has led to a corrupt financial landscape, and that big banks are a crucial part of that infrastructure. Joining a credit union is one way to avoid contributing to the problem.

The Nuts and Bolts: Fees & AccessCredit unions do charge some fees, but they are often lower and more equitable than those at big banks. For example, at Brooklyn Cooperative, there is a $1 monthly fee on savings accounts across the board. “We want everybody to equally contribute to the cost of operating the institution,” says Brooklyn Cooperative’s Pear.

In addition, big banks often charge fees to people who don’t maintain a minimum balance in their accounts, which in turn, means that people with lower incomes who can’t maintain that balance rack up more fees than those with higher income. In fact, the average amount required to open an account at a credit union is $9.84, versus the $65.83 of big banks, according to a Bankrate report.

You might be nervous about losing out on the efficiency and convenience that huge corporations offer, since credit unions have a local focus and therefore don’t usually have many branches. But many credit unions participate in shared branching, meaning you can go to other participating credit unions and bank like you’re at yours. Co-op Financial Services is one of such shared-branching networks. If you’re a member of any of the credit unions in the network, then you can use 30,000 ATMs without surcharges and bank at more than 5,000 shared branches.

Making the Switch As of September 2015, there were 6,213 credit unions in the U.S., according to Zan McKelway, vice president of communications of the Credit Union National Association. Among those, there are several types: some are federal, some are community-based (which usually require you live, work, or worship in a certain neighborhood), and others are established for certain industries. Mattone recommends using the site asmarterchoice.org to find the best credit union for you.

If you decide to move from a bank to a credit union, there are some steps you can take to ensure a smooth transition. Ask the credit union if it offers a “switch kit” — typically a guide full of forms and tools needed to switch accounts. And find out what else you’ll need to open an account. This might include, for example, proof of address, a photo ID, and a social security card or tax ID number.

“Make a list of all your automatic payments you have set up,” Pear adds. “Think about any direct deposits you have. Reconcile your outstanding checks. Open the new account before you close the old account.”

It might take some effort, but moving from a big bank to a credit union is one step you can take to improve your own financial situation as well as your community.